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In December 2016, the Ontario Court of Appeal heard an appeal in Airia Brands v Air Canada. The result of this appeal will have significant impact on the viability of global class actions commenced in Ontario and on the application of the real and substantial connection test in the context of a proposed global class action.

Airia Brands relates to allegations that the defendants unlawfully engaged in a worldwide conspiracy to fix prices of air cargo shipping services. The action was certified in August 2015, but the certified class excluded certain foreign claimants in accordance with a parallel ruling on jurisdiction.[1] The defendants sought leave to appeal the certification decision to the Divisional Court, but leave to appeal was denied on the basis that the same issues were already before the court in Shah.[2]

In the jurisdiction motion, the defendants sought an order staying the action as it related to certain class members located outside Canada (defined as “absent foreign claimants”). The defendants argued that the real and substantial connection test, as formulated by the SCC in Club Resorts Ltd. v Van Breda,[3] is a radical departure from the jurisdictional norms of other countries, meaning that any judgment reached on this basis would not be enforced abroad (the real and substantial connection test establishes jurisdiction simpliciter – the threshold issue of whether the court can properly assume jurisdiction). Accordingly, the defendants argued that the court should only assert jurisdiction over claimants that meet the traditional (presence or consent-based) grounds for jurisdiction. They argued that this approach is consistent with the principles of order and fairness and with the territorial limits in s. 92 of the Constitution Act, 1867.

The motion judge accepted the defendants’ arguments. The motion judge gave great weight to the defendants’ expert evidence on foreign law and concluded that if the Ontario court accepted jurisdiction over absent foreign claimants based on the real and substantial connection test, the resulting judgment would not be recognized or enforced abroad, leaving the defendants exposed to the potential for double recovery on behalf of absent foreign claimants.[4] The motion judge also reasoned that the Ontario court would offend the principle of comity if it asserted jurisdiction in a circumstance where it did not reasonably expect its judgement to be recognized in foreign countries. Accordingly, the motion judge ruled that the real and substantial connection test should not apply. Instead, jurisdiction over class members could not be established unless they were present in Ontario (which by definition did not apply) or consented to the jurisdiction of the Ontario court.

In the alternative, the motion judge held that even if the real and substantial connection test applied, it was not satisfied (it is not clear whether the motion judge found that no presumptive connection was established or whether a connection was established, but successfully rebutted by the defendants). The motion judge held that absent foreign claimants would not expect their claims to be adjudicated by the Ontario court. The motion judge refused to apply the new presumptive connective factor described in Meeking v Cash Store Inc.[5] on the grounds that Meeking was a national, rather than a global, class action. In Meeking, the Manitoba Court of Appeal held that where a court has jurisdiction over the representative plaintiff and the defendants, the sharing of common issues between the representative plaintiff and the non-resident class members gives that court presumptive jurisdiction over non-resident class members.

In the further alternative, the motion judge indicated that even if the court had jurisdiction simpliciter over the claims of absent foreign claimants, Ontario was forum non conveniens (the doctrine of forum non conveniens concerns the court’s discretion to decline to exercise its jurisdiction over a matter on the basis that another forum is more appropriate) as exercising its jurisdiction over these claims would offend the principle of comity and risk exposing the defendants to the potential for double recovery.

By adopting an approach based on presence and consent, the motion judge raised questions about whether real and substantial connection, particularly as part of the Currie test, remains the correct test for the assumption of jurisdiction by Ontario courts in global class actions (in Currie v McDonald’s Restaurants of Canada Ltd, the Ontario Court of Appeal established the controlling test for assumption of jurisdiction over non-resident class members. The factors are: (a) whether there was a real and substantial connection linking the cause of action to the foreign court; (b) whether the rights of the absent class members were adequately represented; and (c) whether absent class members were accorded procedural fairness, including adequate notice).[6] The motion judge’s reasons also raise questions about whether Meeking applies in an international context, how the court should consider the reasonable expectations of class members, and the relevance of possible non-enforcement of a judgement.

While the Airia appeal decision is on reserve, the Court of Appeal’s recent judgment in Excalibur Special Opportunities LP v Schwartz Levitsky Feldman LLP[7] may provide some insight on how the court will decide.

In Excalibur, the plaintiff sought to certify a class action against an accounting firm for negligence and negligent misrepresentation over an audit report that Excalibur and the other investors claimed to have relied on in deciding to invest. The certification judge denied the motion for certification, holding that the proposed claim lacked a real and substantial connection to Ontario and therefore it did not satisfy the class definition criterion under section 5(1)(b) of the Class Proceedings Act, 1992, SO 1992, c 6. While Excalibur and the defendant accounting firm were both based in Toronto, the remaining proposed plaintiffs are all non-residents of Ontario, the company in which they invested was based in the United States, and the transactions were governed by American law. The motion judge relied on Currie for the proposition that the real and substantial test must be applied with “restraint”, having regard to the reasonable expectations of the foreign plaintiffs. He then held that it was “hard to imagine a case where it would be less reasonable to expect that his or her legal claims had a real and substantial connection to Ontario.”

The Court of Appeal overturned this decision, holding that the reasonable expectations of foreign class members is not an independent consideration for the court in determining whether to take jurisdiction of a global class action. The Court of Appeal also held that Currie does not stand for the proposition that an Ontario court should approach the issue of taking jurisdiction in a restrained manner. The Court of Appeal affirmed that the test to determine whether to take jurisdiction over foreign class members begins with the application of the real and substantial test outlined by the Supreme Court in Van Breda. Applying that test to the case at hand, it was clear that the Ontario court had jurisdiction simpliciter, as three of the presumptive connection factors from Van Breda were present on the facts as pleaded – the defendant resided in Ontario, carried on business in Ontario and prepared the audit report in Toronto.

[1] Airia Brands v Air Canada, 2015 ONSC 5352, leave to appeal denied 2016 ONSC 4929 (certification); Airia Brands v Air Canada, 2015 ONSC 5332 (Jurisdiction), appeal to Court of Appeal pending.

[2] Airia Brands v Air Canada, 2016 ONSC 4929

[3] Club Resorts Ltd. v Van Breda, 2012 SCC 17

[4] Airia Brands v Air Canada, 2015 ONSC 5332 at paras 111-115.

[5] Meeking v Cash Store Inc., 2013 MBCA 81 at para 93.

[6] Currie v McDonald’s Restaurants of Canada Ltd (2005), 74 OR (3d) 321 at para 30 (CA)

[7] Excalibur Special Opportunities LP v Schwartz Levitsky Feldman LLP, 2016 ONCA 916.

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